Last week I was traveling by train from Schiphol Airport back home to Amsterdam Central. The train was completely packed. The conductor was not able to pass through the aisles, that’s how crowded it was. The conductor did his job with passion and wit despite the circumstances and complaining passengers. He suggested to leave the doors shut and drive straight to Naarden-Bussum skipping the next five stops. His approach to Customer Retention, he said. Of course, leaving the doors closed and passing by the various stations is not the right way to handle the situation, but he did have a point. If you are able to hang on to your customer after the deal is done it’s much easier to sell to them again. You know them, they know you.
Too many Sales Managers are quick to look “out there” for a solution when it comes to increasing their company’s sales. Their efforts are focused on acquiring new customers and send their Sales reps. out into the world to find more new business.
Curiously enough, decades of research show that this method may not necessarily be the best way to improving sales and ROI. In fact, the numbers indicate quite the opposite: Instead of looking outside their companies to bring in new business, sales teams should turn (part of) their attention to the customers who are already within their grasp and find ways to generate more business out of them.
For those who feel that customer retention plays a relatively minor role in helping a company grow a healthy bottom line, here are a few statistics you might be interested in. According to Bain and Co., a “5% increase in customer retention can increase a company’s profitability by 75%”. And if those numbers don’t impress you, Gartner Group and Leading on the Edge of Chaos by Emmett C. Murphy and Mark A. Murphy, statistics tell us that “80% of your company’s future revenue will come from just 20% of your existing customers”. Convinced already? One final statistic provided by Lee Resource Inc. should give you plenty to think about: “Attracting new customers will cost your company 5 times more than keeping an existing customer”.
So my advice to you is; use the coming holiday season to contact and visit the 20% of your customers who provide the 80% of your revenue. Reconnect and work on the relationship. No doubt it will give you a fresh start for the new year.